As published in Scotsman Guide's Residential Edition, April 2009.
Potentially, we are amid one of the greatest refinance booms in history. No one knows exactly how long it will last -- considering downward pressure on mortgage interest rates and talk of inflation, spurred by recent bailout plans.
Regardless, brokers now have a golden opportunity to pick up market share and capture as much of the refinance business as they can. Consider doing whatever you can to capture more loan volume. Often, this means doing whatever you can to give the borrower a better deal.
To start, recognize the principle of "elasticity of demand." It simply means, in my estimation, that if you lower your price, you likely will gain volume.
With this in mind, brokers are challenged to find ways to optimize their business models to be able to pass on a better deal to their clients. It could sound difficult. But with a little creativity and research, brokers can find that this approach has a significant impact on their business.
First, consider working for a company that offers a better commission split than what you now receive.
For example, even a 15-basis-point split increase in your direction can net you significant gains. Let's say that you work for a company that offers a 70/30 split. On a $400,000 conforming loan, if you charge 1 point, you would gross $4,000 -- retaining $2,800. That's not a bad payday.
But if you could negotiate your split up to 85/15, you would net $3,400, or $600 more per loan. If you close just two loans per month, you could earn an extra $14,400 annually.
While that is an excellent raise, it's also wise to consider passing these savings on to your clients. This can help you gain a competitive advantage by letting them buy down the interest rate or simply by lowering their closing costs. When you're competing for loans, and everyone is shopping around, $600 in savings can be enough to win a deal.
Plus, added business also can lead to more referrals for you -- especially from borrowers who spread the word about your successful services.
It's essential to also find the time to work additional business while adding value for potential borrowers. One way is to employ state-of-the-art technology.
Many Web sites include search engines for loan products. All they require of a broker is to type in a borrower's scenario -- and instantly, all rate sheets are scoured to deliver a list of lenders' relevant programs. Gone are the days of looking at rate sheets or trying to get a hold of an account executive to check on pricing. In many ways, this could revolutionize how you work.
As product lines and pricing change daily -- sometimes multiple times a day -- real-time tools play a larger role. Best, this technology significantly reduces the amount of time you need to find financing for a loan. If you save several hours per loan, you can easily rationalize lowering your fees because of the time you save. And with several more hours per workday, you can work more loans.
Other tech options include those that can help you organize your clients and leads. You've probably had interested borrowers tell you they're waiting for interest rates to drop further. When you have 10 or 20 of those borrowers, monitoring their needs manually can be a huge time burden. Product- and customer-relationship-management systems that can automate some of these tasks often come in handy.
Once you tell your clients you use this technology, you also have the ability to land even more deals. This can put you in a great position to take advantage of the refi boom and whatever lies ahead.
Rick Pelleriti is a senior loan officer at Clarion Mortgage Capital and is a member of the Upfront Mortgage Brokers Association.
To learn more about his business model and how it can help you in today's challenging environment, e-mail him at rick@upfront mortgageplanner.com or call (408) 672-1980.